July 25 2012 Issue

Wednesday, July 25, 2012

Sandler, Travis & Rosenberg Trade Report

U.S. Needs to Do More to Address Foreign Trade Barriers, House Committee Told

The House Foreign Affairs Committee held a hearing July 19 on foreign trade barriers. While much of the testimony from private sector witnesses focused on inadequate protection abroad of U.S. intellectual property rights, other obstacles were addressed as well. The committee’s discussion of these problems and potential solutions could at some point lead to legislative or other measures, though there was no explicit mention of any in the statements made at the hearing.

Committee Chair Ileana Ros-Lehtinen, R-Fla., identified a number of “predatory policies” that harm U.S. businesses. Among these is theft of IPR, particularly when governments knowingly tolerate it or even encourage it. “China is the most egregious example” of such behavior, she said, noting that “despite years of promises by Beijing to crack down on violators and despite a succession of formal commitments to do so, the theft of intellectual property remains epidemic.” But China also has a “vast array” of other trade barriers, including “state-owned businesses using government power for their own ends, illegal subsidies of domestic companies, discriminatory regulation, a bureaucracy impenetrable to outsiders, currency manipulation, and a legal system that is all but worthless in enforcing contracts.”

“The most proven method” to remedy trade barriers abroad, Ros-Lehtinen said, is “enforceable free trade agreements with responsible countries.” However, this remedy “cannot be effectively used at present, in large part because the expiration of the President’s Trade Promotion Authority has made the negotiation and approval of new trade agreements almost impossible.” Restoring TPA “will enable our entrepreneurs to compete effectively and to create the jobs so many Americans are searching desperately for,” she said. Congress must also ensure that the White House “vigorously uses the tools it already possesses to deal with those countries that openly prey on U.S. businesses, including strong and unilateral measures to penalize governments which refuse to uphold their commitments and agreements.”

Former U.S. trade official Grant Aldonas asserted that the “new protectionism” emerging today is more than just an economic threat and should be dealt with accordingly. “Government intervention in markets, limits on consumer choice, [and] diminished opportunity for private investment and entrepreneurship” are among the growing number of policies and practices that “either fall short of full compliance with the existing global rules or are designed to evade those rules,” he said. Specific examples include stricter licensing requirements, safeguard and antidumping/countervailing duty measures, export restrictions, technology transfer requirements, IPR theft and government subsidies. These policies and practices not only harm the U.S. economically by limiting opportunities for growth but also pose a national security threat because slower growth “limits our ability to pay for America’s reach.”

Moreover, Aldonas warned, this “new protectionism” is “not simply a trade policy response to the slow global recovery” but reflects “an unacknowledged competition of economic models.” This competition pits the free market against the state and features the U.S. and China as key players, with other countries such as Brazil and Argentina playing a part as well. Aldonas therefore encouraged members of Congress to “think of the array of unfair trade practices that our firms and workers confront in that context, rather than thinking of them simply as ‘one off’ measures affecting particular goods or services.”

Derek Scissors, senior research fellow for Asia economics at the Heritage Foundation, said that while China presents a number of trade-related challenges the “top priority” in bilateral trade talks should be government subsidies that effectively block U.S. exports from the Chinese market. China “is far from alone as a subsidy abuser, but it stands out in the size and nature of subsidization,” he said, which takes many forms. The most important of these is regulatory protection because “it suppresses competition, including competition from imports.” Current World Trade Organization rules “cannot address” this particular barrier, but any U.S. action “will be ill-considered and likely harmful until a proper understanding and measurement of subsidies is in place.” The U.S. should therefore undertake such a measurement independently and include regulatory protection against competition. While this will be “difficult, inexact and controversial at the outset,” Scissors said, it will allow Washington to make concrete proposals to Beijing instead of “numerous, vague demands which are never met.”

Other well-known bilateral trade irritants should be given less prominence, Scissors added. IPR violations “rob the U.S. of comparative advantage” but there is “no apparent solution” to this problem. Retaliatory measures “can be justified,” he said, but offer “little hope for progress.” Of the alleged undervaluation of China’s currency, one of the policies targeted most frequently on Capitol Hill, Scissors said this is “a minor factor compared to IPR and subsidies” and should therefore “be dropped from the list of U.S. priorities.”

Although RLF was intended to be a completely electronic process, CBP regulations allow an interim hybrid process that provides for CBP review of certain other government agency paper forms in conjunction with the RLF data in the Automated Commercial System or the Automated Commercial Environment. For eligible forms, ports have the discretion to determine the manner in which the filer provides them; i.e., whether a fax is acceptable or if the filer must deliver the documentation to a designated location at the port. Consequently, it is necessary for those interested in submitting hybrid RLF entries to reach out to the RLF coordinator at the port of entry to determine the port's process prior to submission.

There are specific types of merchandise that continue to be ineligible for entry via RLF; e.g., entries for which one of the following original documents is required. Additionally, RLF transmissions continue to be limited to entry types 01 and 11.

The Fish and Wildlife Service has issued a final rule that, effective Aug. 23, will add six South American bird species to the list of endangered species. These species are the ash-breasted tit-tyrant (Anairetes alpinus), Junín grebe (Podiceps taczanowskii), Junín rail (Laterallus tuerosi), Peruvian plantcutter (Phytotoma raimondii), royal cinclodes (Cinclodes aricomae), and white-browed tit-spinetail (Leptasthenura xenothorax). All six species are native to Peru and two are also native to Bolivia.

This rule will prohibit the following actions with respect to these birds: importation, exportation and shipment in transit through the U.S. (whether or not it has entered the country for customs purposes); delivery, receipt, carriage, transportation or shipment in interstate or foreign commerce by any means and in the course of a commercial activity; and sale or offer for sale in interstate or foreign commerce.

64 Individuals Prohibited from Defense Trade for Export Violations

The Department of State has imposed statutory debarment under the International Traffic in Arms Regulations on 64 persons convicted of violating or conspiring to violate Section 38 of the Arms Export Control Act. As a result, these individuals are prohibited from participating directly or indirectly in the export of defense articles, including technical data, or in the furnishing of defense services for which a license or other approval is required.

The period for debarment is generally three years from the date of conviction. Export privileges may be reinstated only at the request of the debarred person followed by the necessary interagency consultations, after a thorough review of the circumstances surrounding the conviction, and a finding that appropriate steps have been taken to mitigate any law enforcement concerns. Unless export privileges are reinstated, the person remains debarred.

Trade Advisory Committee on Small and Minority Business to Meet Aug. 10

The Office of the U.S. Trade Representative’s Industry Trade Advisory Committee on Small and Minority Business (ITAC-11) will hold a partially open meeting Aug. 10 in San Diego, Calif. Topics to be discussed include proposed increases in U.S. & Foreign Commercial Service fees, access to and use of the Small Business Administration’s State Trade and Export Promotion grants by San Diego-area business, the congressional perspective on trade barriers for small and minority businesses, and pending trade legislation that would impact small and minority businesses.

According to the National Institute of Standards and Technology, the World Trade Organization has been notified of regulatory changes that may affect exports of specific products to the following countries. For information on how these restrictions may affect your business, contact ST&R.

Brazil – June 18 adoption of technical regulations for equipment for water heating using solar energy, blister packages for food, and lead acid batteries for automotive vehicles

The State Department has determined that the following five entities in Syria have engaged in proliferation activities that warrant the imposition of certain measures.

- Business Lab - Handasieh, also known as General Organization for Engineering Industries - Industrial Solutions - Mechanical Construction Factory - Syrian Arab Company for Electronic Industries, also known as Syronics

Accordingly, effective July 24, the following measures are imposed on these entities and their subunits and successors for two years.

- no U.S. government department or agency may procure or enter into any contract for the procurement of any goods, technology or services from these entities

- no U.S. government department or agency may provide any assistance to these entities or obligate further funds for such purposes

- prohibition on imports of any goods, technology or services produced or provided by these entities other than information or informational materials

- suspension of all licenses and other approvals for (a) exports and other transfers of defense articles and defense services from the U.S, (b) transfers of U.S.-origin defense articles and defense services from foreign destinations and (c) temporary imports of defense articles to or from these entities

Trade in Fresh Fruits and Vegetables Subject of Aug. 30 Meeting

The Department of Agriculture’s Food Safety and Inspection Service will hold an open meeting Aug. 30 in preparation for the 17th session of the Codex Committee on Fresh Fruits and Vegetables, which will be held in Mexico City Sept. 3-7. The CCFFV is responsible for elaborating worldwide standards and codes of practice for fresh fruits and vegetables. The following items on the agenda for the 17th session of the CCFFV will be discussed during the Aug. 30 meeting.

- standards for avocado, pomegranate, golden passion fruit and durian

- proposals for new work on, and proposed layout for, Codex standards for fresh fruits and vegetables